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Tenant Turnover – The Biggest Killer of your Cash Flow


The worst thing for any landlord is tenant turnover. Tenant turnover happens when a tenant vacates a rental property. Not only does vacancy mean no money is coming in, but landlords also have to invest time and money in finding new tenants. This is expensive for the landlord, as the property management includes cleaning, repairs, and painting before a new tenant settles in. The strongest rental businesses have low turnover among their tenants. This keeps their cash flow steady and reduces costs.

Costs of Tenant Turnover

- Administrative Costs
The time and effort it takes to process tenants out and process new ones in.
- Advertising Costs

It includes the costs for print and web based classified ads, put up signs, hold open houses, etc.

- Showing Costs

Someone has to answer the phone calls, set showing appointments, drive to the property and show it to potential tenants.

- Application Costs

You have to run credit and criminal background checks, verify work and income information and process the application.

- Repair Costs

There is always some amount of repair costs as properties have to be cleaned, repaired and painted before a new tenant moves in.

- Lost Income Costs

When your property is vacant, it is not generating any cash flow at all, much less a positive cash flow.

Steps to Reduce Tenant Turnover

- Pre-qualify all tenants

Do a thorough backgrounds check to detect their previous rental habits. Avoid tenants with past instances of broken leases or evictions. Also, avoid tenants with significant legal issues, as he or she may cause other tenants to leave.

- Make Regular Improvements

Nobody likes being ignored. One of the most common points of friction between landlords and tenants is repairs and improvements. But keep in mind that investing in regular improvements and not just repairs, can reduce tenant turnover and even increase the amount you are able to charge in rent.

- Review Rental Increases

Landlords and tenants are faced with a basic conflict of interests as landlords want to charge as much as possible in rent and tenants want to pay as little as possible. When you are seeking to maximize your profit by increasing your rent, you need to make sure the increase is in your best interest.

- Attract Good Tenants

One of the best things you can do to reduce tenant turnover, is to make sure you are renting to the right people to begin with. Because not all tenants are the same, finding the right tenant is about more than just making sure someone has good credit.

- Respond to all Tenant Requests Quickly

Whether the tenant has a question or submits a maintenance request, respond with an answer or a status within a few hours. Provide a timeline of expected actions if there is not a simple solution to the request.

- Personalize Services to your Tenants

Provide incentives for tenants to renew their leases. Offer gift cards to those who decide to stay or free rent for 1 month for those who have renewed several times.

Hiring a property management firm will take care of your property and reduce tenant turnover.

The author is an experienced property manager dealing with property management services in Kansas City. She shares her expertise on whether one should rent a property management firm.

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